From 1 November 2012, REs will need to comply with new financial resource requirements.
To meet the new net tangible asset ("NTA") capital requirements, REs must hold the greater of:
- 0.5% of the average value of scheme property (capped at $5 million); or
- 10% of the average RE revenue (uncapped).
A liquidity requirement has also been introduced where an RE must hold at least 50% of its NTA requirement in cash or cash equivalents, and an amount equal to the NTA requirement in liquid assets.
In addition, the RE will need to prepare and maintain cash flow projections which cover a period of at least 12 months. The cash flow projections will need to be approved by the Board on at least a quarterly basis. The cash flow projections will need to be updated when:
- cash flows cease to cover the next 12 months;
- there is a material change in which it would be reasonable for you to plan by updating your cash flow projection; or
- the RE has reason to suspect that an updated projection would show that the RE will not have adequate financial resources to meet liabilities or will have inadequate funds to meet the liquidity requirement discussed above.
To download a full copy of Class Order 11/1140 visit www.asic.gov.au or click here.
How can we assist you?
Licensee Solutions is able to help you to obtain an RE licence and assist with the monitoring of your obligations as an RE. To the extent to which any issues require the provision of legal services, we can refer you to our associated law firm, Halsey Legal Services. Licensee Solutions and Halseys can assist you by providing:
- advice on the best structure for the entities involved and the outcomes to be achieved;
- documents, including compliance plans, constitutions, intermediary agreements, mandate letters and disclosure documents such as product disclosure statements;
- advice on key outsourcing arrangements including custody, administration, registration and broker arrangements;
- technical regulatory and compliance advice;
- advising on structuring fees, profit sharing arrangements (such as performance fees) and employee incentive arrangements;
- advising on corporate governance, conflict resolution mechanism and regulatory compliance;
- review marketing materials or any existing disclosure documents;
- advice in respect of incentive programs for retaining key funds management personnel; and
- liaison with ATO, and obtaining product rulings where appropriate.
For more information on how we can assist you, please telephone Fiona Halsey for a confidential discussion on (08) 9381 2914.